The travel sector is leading the way in Indian e-commerce, with one third of all travel bookings made online, says a new report from McKinsey & Company. As in many developing countries, logistics and infrastructure have hindered e-commerce growth in the Sub Continent with many retailers unable to deliver physical products, however the ability to download tickets or use e-documents removes this huge barrier for travel retailers. India’s travel market is currently dominated by two local players MakemyTrip and Yatra, which hold 48% and 30% of the market respectively and 40% of train reservations are now made online.
Despite the strength of local brands, there are still huge opportunities for international brands to capitalise on the growth of the sector, as more of India’s 1.3 billion strong population get online. Currently only a meagre 1% of Indian retail sales come from e-commerce, yet the market is set to be worth $2bn by 2015. Internet penetration is only 8.4%, low by many countries’ standards, however in a country of such size actually equates to 38 million users – by no means a small number.
It is not just the travel sector that will benefit from the growing popularity of internet shopping – 80% of Indian web users say they plan to shop online in the near future – however any growth is not without challenges. Many retailers are investing heavily in improving logistics to be able to service users around the vast country, and such investment is necessary yet it is a highly competitive space, with many local offerings as well as international competition from the likes of Amazon, who launched a version of its site in India earlier this year. Perhaps the largest challenge could be the matter of payment, with cash on delivery still the preferred method of payment in 80% of web purchases. Concerns over cyber-security are high, and with less than 1% of Indian citizens using credit cards, there is unlikely to be a swift change is payment habits.
The conclusion: India has potential for ecommerce brands. Its users are becoming increasingly aware of the benefits of buying online and slowly becoming more inclined to do so. But make no mistake, it is a challenging marketplace and failure to understand its intricacies and plan for them, will simply result in failure for a brand.
Gemma Houghton
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